Bajaj Hindusthan Sugar Ltd

Dear Stakeholders,

It gives me immense pleasure to present Bajaj Hindusthan Sugar Limited's (BHSL) 92nd Annual Report for the financial year 2023-24. This year has been a transformative one for your company due to evolving market dynamics, and renewed focus on operational excellence, sustainability, and social responsibility.

During FY 2023-24, the global sugar industry witnessed a period of tremendous flux. Strong sugar prices globally, driven by factors such as reduced exports from India significantly reshaped the market dynamics, presenting both challenges and opportunities for your company.

While India strategically restricted sugar exports in 2023-24 to ensure domestic availability, this decision unquestionably impacted our export volumes and deprived Indian Sugar sector from realising higher international prices. Further, limitations on diverting sugar towards ethanol production added another layer of complexity. However, BHSL, proving its resilience, proactively shifted its cane crushing operations to C Molasses instead of B Molasses or syrup well ahead of these restrictions. This strategic decision, based on market analysis, ensured that we were not subject to the same constraints as the broader industry. As a result, BHSL was well-positioned to capitalize on favorable domestic sugar prices throughout the year, not only for sugar but also for ethanol derived from C Molasses.

Beyond these, we made several great strides in other key areas too. Perhaps the most significant of these, was the successful resolution of the NCLT issue concerning your company. This dismissal of the insolvency petition, following the settlement of dues, allows us to focus on our core business activities. This positive development has instilled renewed confidence within the organisation, enabling us to invest in the future with greater vigour and clarity.

The future of the sugar industry is brimming with both challenges and immense potential. Even if the Government continues with the restriction on sugar exports and regulation on diversion of sugar towards Ethanol, your company is well-equipped to deal with these situations and see such challenges as opportunities. BHSL's focus on diversified product portfolio that includes sugar production, optimisation of by-products, improved co-gen and increased export of power, ethanol production, and established market reach will serve us well.

To fully capitalize on the domestic market, we are implementing a multipronged approach. Firstly, we are continuously striving to improve cane quality through investments in cane development initiatives. This not only increases sugar yield but also enhances the overall efficiency of our operations resulting in improvement of our sugar recovery this year.

Secondly, we are leveraging our strategic geographic presence. With 14 sugar mills strategically located across Uttar Pradesh, we are well-positioned to cater to diverse regional markets and optimize domestic sugar production and sales. This geographic spread also mitigates risks associated with localised weather patterns or disruptions.

Country's Ethanol blending program is continuing in line with Government target and achieved blending percentage of almost 12% during ESY 2022-23 and poised to achieve 20% level by ESY 2025-26. The government is encouraging the industry to put up new Ethanol capacities by giving soft loans, price in line with cost. Various states like Bihar, Jharkhand, and West Bengal offer capital subsidies, interest rate subventions, and other benefits for setting up new ethanol units.

This policy, along with other incentives, has significantly increased ethanol supplies. Reduction in GST on Ethanol from 18% to 5%, I(D&R) act amendment 201 6, restriction on import of alcohol for blending, fast payments, eased tender conditions are creating a win-win situation for both oil companies and sugar industry. Furthermore, the recent launch of E20 (20% ethanol blended petrol) and upcoming introduction of Flex-Fuel Vehicles (FFVs) capable of using higher ethanol blends promise significant growth in the ethanol sector. Recognising the evolving market dynamics and the government's push, BHSL has significantly increased its ethanol production this year.

These developments augur well for us, and we are well-positioned to capitalize on them with our focus on operational excellence and innovation in ethanol production. Besides, it aids our efforts towards sustainability and push for clean energy too.

We understand that our success relies on fostering strong relationships with all our stakeholders. This includes our employees, who are the backbone of our operations. Through continuous skill development programs and a commitment to providing a safe and healthy work environment, we strive to build a culture of excellence within the organisation.

Furthermore, we maintain strong relationships with our century-old generations of more than 5 lakhs sugarcane farmers, who are our strongest and most vital partners in the entire value chain. We are committed to timely payments at government-fixed prices to ensure their economic well-being in addition to a steady supply of high- quality cane. Additionally, we are actively collaborating with research institutions to develop high-yielding and disease- resistant sugarcane varieties, further benefiting our farmer communities.

The Indian government has played a crucial role in shaping the sugar industry landscape through its policies on domestic sugar availability, ethanol blending promotion, and minimum support prices (MSP). While we appreciate the government's focus on domestic sugar security, we believe certain policy revisions are necessary to ensure longterm industry sustainability.

BHSL urges the government to consider a price revision for syrup and B-heavy molasses-based ethanol, reflecting production costs more accurately. The current pricing structure is not considered viable by the industry, and an adjustment would incentivise increased ethanol production from these sources, aligning with the government's biofuel goals.

Additionally, an increase in the MSP for sugar is crucial to account for rising input costs, particularly cane prices, which have witnessed a significant increase in recent years. A viable MSP is essential to ensure financial viability for sugar producers and encourage continued investment in the sector.

At BHSL, we recognize that our success is inextricably linked to the well-being of our environment and the communities we operate within. We have made significant strides in sustainability efforts, aiming to reduce our carbon footprint and increase the use of renewable energy sources. This includes investments in co-generation plants that utilize bagasse, a sugarcane by-product, to generate electricity, lowering our dependence on fossil fuels.

Your company also inked a crucial deal this year, a sustainable initiative of repurposing press mud, a by-product of sugar production, to generate compressed biogas (CBG) contributing to reduction in greenhouse gas emissions. This innovative approach not only addresses waste management but also aligns with India's push for clean energy. By leveraging press mud for CBG production, the company has further integrated eco-friendly practices while fostering energy independence.

Beyond sustainability and environmental leadership, we are actively engaged in community development initiatives focused on education, healthcare, and rural development in the areas surrounding our plants. These efforts underscore our founding belief and legacy in creating a positive social impact and nation building alongside economic prosperity.

The past year has been a transformative one for BHSL. We weathered challenging market conditions, emerged stronger, and are now poised for future growth. Our commitment to operational excellence, sustainability, and social responsibility remains unwavering.

Looking ahead, we are confident that by working collaboratively with our stakeholders - shareholders, partners, lenders, employees, and sugarcane farmers - we can navigate the evolving sugar industry landscape and build a future of shared success.

To this end, I remain grateful for your continued support and invite you to explore this annual report for a more detailed understanding of our performance and future endeavours.

Chairman, Bajaj Hindusthan Sugar Limited